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The number of registered e-commerce merchants has risen by 2.6-times and e-commerce payments have surged 2.3-times in a span of just twelve months, as per a State Bank of Pakistan (SBP) report. But this is still a young market with significant room for growth.

Pakistani businesses have embraced e-commerce. Hundreds of retailers, ranging from clothing outlets to electronic equipment stores, are now using websites to sell goods to customers.

The emergence of several online marketplaces, such as Daraz.pk and OLX Pakistan, has made it easier for retailers to sell goods on the web. At the same time, a number of new online businesses have also propped up.

As per the SBP’s Payment Systems Review (Q2FY18), there were a total of 344 e-commerce merchants in the country registered with banks at the end of 2016. By the end of 2017, that number had climbed to 905.

This growth was accompanied by a surge in e-commerce transactions from these merchants from Rs3.9 billion in the last three months of 2016 to Rs9.1bn in the last three months of the previous year. The central bank’s report also indicates that around 800 million payment transactions totalling Rs4.5bn were booked in the last three months of 2017. That’s also considerably greater than the Rs2bn e-commerce payments that happened in the same period of 2016.

The actual value of e-commerce sales is likely several times larger than mentioned because the central bank’s report only shows those transactions that occurred through debit or credit cards

The actual value of e-commerce sales, however, is likely several times larger than the above-mentioned numbers. That is because the central bank’s report only shows those transactions that occurred through debit or credit cards.

But Pakistani consumers mainly use the cash-on-delivery (COD) system to buy goods online. As per one estimate, almost 85 per cent of online sales occur through COD. Using this, we can speculate that roughly Rs25.5bn e-commerce payments may have occurred in the Oct-Dec period through the COD system.

It wasn’t long ago when the Pakistan Telecommunication Authority noted in its annual report for the previous fiscal year that the size of Pakistan’s e-commerce market could grow from $60m-$100m in 2015 to $1bn by 2020.However, industry experts now believe that the country could hit the key milestone by as soon as this year.

If the country continues to witness e-commerce sales of Rs30bn in every quarter from electronic card and COD system, just as it likely did in the last three months of 2017, then the total sales for the ongoing fiscal may clock in at Rs102bn, or $1.1bn at the current exchange rate. If however, Pakistan witnesses an increase in online sales, which could be driven by the Eid shopping season, then the market could go way past the $1 billion threshold in 2018.

At $1 billion, however, the size of Pakistan’s e-commerce market will still be tiny. Global e-commerce retail sales are expected to be around $2.8 trillion in 2018, as per data from Statista, a provider of market and consumer data.

China is the world’s largest e-commerce market where the online retail sales are forecasted to be around $600bn for 2018, followed by the US with $461.5bn of expected sales. India could report $25bn of retail e-commerce sales in the current year.

That being said, Pakistan is still a young e-commerce market where less than one-fifth of the total population uses the internet.

As per latest data from Internet Live Stats, the global internet penetration rate is around 46pc. In developed markets like the US, the metric is over 80pc. In Pakistan, however, a little less than 18pc of the population has access to the internet. That’s less than half of the global average, which means that there’s significant room for growth although internet penetration in the country has already grown significantly from just 8pc in 2010.

Moving forward, as our economy expands and internet penetration grows, the country will likely witness a surge in e-commerce activity. Miftah Ismail, the adviser to the Prime Minister on finance, has said that the counrty’s growth rate could accelerate to 6pc in the current fiscal year. This will likely fuel considerable growth in e-commerce transactions in the future.

The writer is a capital markets expert and a business and finance commentator

On DawnNews

Comments (3) Closed

Fuzail Z. Ahmad

Mar 26, 2018 01:50pm

Good article. I will hold the FBR singularly responsible for the huge amount exchanging hands from COD. Is FBR even interested in heeding to the suggestion to reduce the huge and rising float of currency in circulation? Is SBP taking it seriously too?

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Vikas

Mar 26, 2018 04:44pm

How is a 102 bn Rupees equal to 1.1 billion USD??? Is this last weeks exchange rate? Pakistan now needs to calculate the conversion on weekly basis and very shortly daily basisi before the stage will finally bereached to be calculated on hourly basis as in venezuela and Zimbabwe.

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flawed logic

Mar 27, 2018 04:43am

"then the total sales for the ongoing fiscal may clock in at Rs102bn, or $1.1bn at the current exchange rate."

At current exchange rate PKR 102 billion would be closer to $880 million NOT $1.1 billion. It has been a very long time since `1 USD was equal to PKR 92.7 which is the implied currency exchange rate in the article.

"India could report $25bn of retail e-commerce sales in the current year. "
You need to do like for like comparison. In Pakistan's case you are considering cash on delivery sales in arriving at the e-commerce number but in India's case you just consider digital transactions.